V05-17 - Typo Sighting : Retired Discussions [Locked]
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# V05-17 - Typo Sighting

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22 Jun 2014, 13:18
V05-17
My commentary re: the type below END SOLUTION tag...

===Original Question===
Which of the following stipulations would be most helpful in assuring the success of the CEOs’ plan to provide more variety in accounting services by breaking up the Big Four firms?

Federal regulations require that corporations use separate accounting firms for audit and non-audit services. This presents difficulties for many multi-national companies because there are only four large international accounting firms based in the United States. An outspoken group of CEOs has suggested breaking up the "Big Four" firms into smaller operations, so that corporations will have more options for their accounting needs.

a) The firms should maintain their multi-national contacts.
b) CEOs for the new companies should be chosen from inside each firm.
c) Corporations must keep the same firm for their audit services, but should choose a new firm for non-audit needs.
d) The new firms should maintain their internal audit procedures.
e) The Big Four firms should divide so that the audit and non-audit sections are not broken up.

==Provided Solution==
Situation: A group of CEOs has proposed that the Big Four accounting firms be broken into smaller firms so that corporations will have more options for audit and non-audit services.

Reasoning: Which added provision will help assure the success of the CEOs’ plan? The CEOs suggest breaking up the Big Four firms so that corporations can have more choices for their audit and non-audit services, which must, by federal regulation, not be performed by the same firm. Anything that further insures that audit and non-audit services will be kept separate in breaking up the firms will also assure that CEOs will get the added variety they are seeking.

A) This option does not directly impact the question of variety.
B) The origin of new CEOs does not deal with variety or with the separating of audit and non-audit services.
C) This provision specifies what decisions corporations may be allowed to make, but it does not insure variety.
D) This option does not directly impact the question of variety.
E) If each Big Four firm breaks into two – one performing audit services, and one performing non-audit services – then the field will have gained the variety sought by CEOs.

==END SOLUTION==

I agree with the logic of selecting E). However, when the question is asked, it appears there's a type that takes "E" out as a rational response.

Quote:
e) The Big Four firms should divide so that the audit and non-audit sections are not broken up.

To use the same logic as in the solution: Although the Big Four firms are dividing, the fact that the audit- and non-audit sections ARE NOT broken up in (E) does nothing for variety.
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Re: V05-17 - Typo Sighting [#permalink]

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23 Jun 2014, 17:03
Thanks - will take a look ASAP
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24 Jun 2014, 06:46
Quote:
I agree with the logic of selecting E). However, when the question is asked, it appears there's a type that takes "E" out as a rational response.

Quote:
e) The Big Four firms should divide so that the audit and non-audit sections are not broken up.

To use the same logic as in the solution: Although the Big Four firms are dividing, the fact that the audit- and non-audit sections ARE NOT broken up in (E) does nothing for variety.

I am not sure if I completely understand what you are saying. I would say that the word "broken" is a little misleading. I can offer thoughts on the question. Please post if you are doubtful

Read the question stem: Which of the following stipulations would be most helpful in assuring the success of the CEOs’ plan?
A Plan/Strategy question. We need to support/strengthen/assure the success of the plan.
What is the plan? - To provide more variety in accounting services, break up the Big Four firms.
We are looking for more variety.
I think most of you are fine with A, B and D not being the answer.
C says that the corporation should keep the same firm for audit but choose a new firm for non-audit. It has no relevance to the plan. The plan is to create variety. How the corporations will choose to use that variety is absolutely up to them.

Now, why is E the answer?
The Big Four firms should divide so that the audit and non-audit sections are not broken up.
This says that if one firm A, breaks up into two firms B and C, both B and C should have audit and non-audit sections. You should not split the audit and non audit sections. Now, if this happens, the corporations get even more variety.
Today corporations have 4 options for audit functions and 3 (after one firm is chosen) for non- audit functions.
Lets say if each of the 4 firms breaks into 2 firms, with audit going to one firm and non audit going to the other firm then options for audit services - 4, options for non audit services - 4
But if each of the 4 firms breaks into 2 such that each firm has both audit n non audit functions, then options for audit functions - 8, options for non audit functions - 7 (after a firm is chosen for audit).
Hence (E) assures the success of the plan of creating variety.

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Re: V05-17 - Typo Sighting [#permalink]

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10 Jul 2014, 07:44
Trying again with my interpretation....

Quote:
E) The Big Four firms should divide so that the audit and non-audit sections are not broken up.

I think the part in E) that is causing confusion is the "so that." When I read E) to me it implies dividing the firms will result in ("so that") the audit and non-audit sections remaining intact. These seems logically impossible.

@souvik101990, you're suggesting that the "so that" plays a different role. Your reading implies dividing the firms in a way such that ("so that") the audit and non-audit sections remain intact in the resulting (divided) firms.

Thoughts?
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10 Jul 2014, 08:41
Quote:
@souvik101990, you're suggesting that the "so that" plays a different role. Your reading implies dividing the firms in a way such that ("so that") the audit and non-audit sections remain intact in the resulting (divided) firms.

Yes. Not Broken up means the new smaller firms has audit AND non audit functions.
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V05-17 - Typo Sighting   [#permalink] 10 Jul 2014, 08:41
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# V05-17 - Typo Sighting

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